Tesla agreed $16.5bn chip supply deal with Samsung, Elon Musk confirms

July 28, 2025

Tesla CEO, Elon Musk has confirmed that the automaker has signed a $16.5 billion chip supply deal with Samsung Electronics.

The agreement is expected to boost Samsung’s struggling contract chip manufacturing business.

Following the announcement, Samsung’s shares jumped more than 6%.

“Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation AI6 chip. The strategic importance of this is hard to overstate,” Musk posted on X Monday.

The deal comes after months of negotiation and follows a newly agreed 15% import tariff on most EU goods — half the rate once threatened by former President Donald Trump.

Musk appeared to reference Samsung’s delayed chip plant in Taylor, Texas, which has faced setbacks due to a lack of major customers.

“Samsung agreed to allow Tesla to assist in maximizing manufacturing efficiency,” Musk said. “This is a critical point, as I will walk the line personally to accelerate the pace of progress. And the fab is conveniently located not far from my house.”

No specific timeline was given for production of the AI6 chip.

However, Musk has previously said Tesla’s A15 chips will enter production by late 2026, suggesting the AI6 could come afterward.

Samsung currently produces Tesla’s A14 chips, which support its Full Self-Driving system. Musk has said TSMC will manufacture Tesla’s AI5 chips, first in Taiwan, then in Arizona.

Last October, Reuters reported that Samsung had delayed taking deliveries of chipmaking equipment from ASML for its US fab, citing the lack of major customers. The plant’s launch has already been pushed to 2026.

Samsung, the world’s largest memory chipmaker, is also expanding into logic chip production via its foundry business. The Texas project plays a central role in Chairman Jay Y. Lee’s efforts to move beyond memory chips and compete directly with foundry leader TSMC.

TrendForce data shows Samsung holds just 8% of the global foundry market, compared to TSMC’s commanding 67%.

Samsung initially announced the $16.5 billion supply agreement without naming the client.

Three sources later confirmed to Reuters that Tesla was behind the deal, which will run through 2033.

The timing comes as Samsung prepares to report earnings Thursday and continues to face pressure in the competitive AI chip space. Rivals like TSMC and SK Hynix have taken the lead, impacting Samsung’s profitability.

Analyst Pak Yuak of Kiwoom Securities said the Tesla deal could ease the burden on Samsung’s foundry unit, which he estimates lost over 5 trillion won ($3.6 billion) in the first half of 2025.

Samsung has reportedly lost key clients to TSMC, including Apple, Nvidia, and Qualcomm.

It remains unclear if the Tesla deal is linked to ongoing trade talks between South Korea and the US, as Seoul seeks partnerships to reduce potential 25% US tariffs on Korean goods.

Analysts note that despite Samsung’s technological hurdles, this agreement with Tesla could mark a significant step toward regaining lost ground in the chip manufacturing race.

(Reuters)